Rebuilt Title Car Loans: What You Need to Know Before Buying

You find a used car with an incredibly low asking price. Kelley Bluebook says it should cost much more. Should you jump on the deal? Not yet. You need to check the car’s title first.

A very low price often means the car has a branded title. It could be a salvage title or a rebuilt title. Running a vehicle history report before buying is essential. You need to understand what these titles mean and why financing can be challenging.

Vehicle Titles Explained

Your car title proves you own the vehicle. A branded title signals something unusual about the car’s history. The most common branded titles are salvage and rebuilt titles.

Cars with these titles were declared a total loss by insurance companies. Salvage title vehicles aren’t roadworthy in many states. Some people call salvage titles “junk titles.”

Different states handle salvage and rebuilt title cars differently. Check with your state’s department of motor vehicles before buying. You don’t want to buy a car you can’t legally drive.

Several concerns come with salvage title cars. You may struggle to get car insurance. Finding an auto loan can be nearly impossible. The vehicle might be unsafe to drive.

What Is a Salvage Title?

A salvage title appears after a car is declared a total loss. Extensive damage triggers this classification. The damage usually comes from accidents or theft. Natural disasters like floods, fires, or hurricanes can also cause it.

States require salvage titles for important reasons. Buyers need to know about potential safety issues. Insurance companies need to assess their risk properly. Salvage title cars are much riskier to insure.

Lenders need this information too. The car serves as collateral for your auto loan. Financing a salvage title car is nearly impossible. Getting insurance coverage is equally difficult.

What Is a Rebuilt Title?

A rebuilt car was once declared a total loss. The vehicle has since been repaired. Some states call this a reconstructed title.

Most states require a state inspection before the upgrade. The car must pass to move from salvage to rebuilt status. The rebuilt title certification means the car is now safe to drive.

A salvage title car can never have a clean title. The best it can achieve is a rebuilt title. The branded status stays with the vehicle forever.

The Pros and Cons of Buying a Rebuilt Title Car

The biggest advantage is the lower purchase price. Rebuilt title vehicles cost less than clean title cars. You can expect to pay 20% to 40% below Blue Book value.

But a cheaper purchase price doesn’t guarantee long-term savings. You’ll face higher costs in other areas.

If you secure a loan using the car as collateral, expect higher interest rates. Your good credit score won’t help much here. The collateral has less value than a clean title car. Lenders charge more to cover increased risk.

Repair costs often run higher than normal. The car sustained severe damage previously. Unknown weaknesses might make the vehicle unsafe.

Insurance presents another challenge. If you can get coverage, you’ll pay more. Insurers take on greater risk with rebuilt title cars.

Buying a rebuilt title car during financial hardship usually doesn’t make sense. Insurance and payment costs add up quickly. You might afford it if you have good standing with a credit union. But they’ll require full coverage insurance, which may be impossible to obtain.

Weigh all extra expenses before deciding. The hidden costs can eliminate any initial savings.

Financing a Rebuilt Title Car

Getting financing for a rebuilt title car is challenging. You’ll have fewer options than with a clean title. Lenders use the car as collateral for the loan. Your vehicle secures the debt.

If you stop making payments, the lender repossesses the car. They sell it to recover their money. Rebuilt title cars make this process harder for lenders.

The vehicle’s value is difficult to assess. Rebuilt title cars are worth much less than clean title vehicles. They may have ongoing issues that worry lenders. What if the car breaks down before you finish paying?

They represent higher risk for lenders. You’ll face loan denial or unreasonable terms. Lenders also worry about your finances. Seeking a rebuilt title car can signal financial trouble.

Remember that rebuilt title car loans differ from title loans. Title loans use a car you already own as collateral. These short-term loans charge extremely high interest. Rates often exceed 300% annually.

Financing a Car With a Personal Loan

A personal loan might work for financing a rebuilt title car. Personal loans are unsecured debt. The car won’t serve as collateral. Full coverage insurance won’t be required.

You’ll still need liability insurance or your state’s minimum coverage. This costs less than full coverage. But personal loans come with a catch.

Interest rates are higher without collateral. You’ll pay more over the life of the loan.

Making Your Decision

Buying a salvage title car requires significant repair costs. You’ll need to rebuild it to make it roadworthy. Buying a rebuilt title car brings its own challenges.

Financing is difficult to secure at reasonable rates. Insurance payments will likely be higher. Expect increased repair costs compared to clean title cars.

The lower purchase price might seem attractive. The quality of the rebuilding work matters greatly. These factors might outweigh the concerns for some buyers.

Do your homework before committing. Calculate total ownership costs, not just the purchase price. Understand your state’s specific requirements. Get a thorough inspection from a trusted mechanic.

If you’re facing financial difficulties, a rebuilt title car adds extra burdens. Higher insurance, maintenance, and financing costs strain tight budgets. Our partner Cambridge Credit Counseling can help you create a realistic budget for vehicle ownership.

You have safer alternatives if money is tight. Consider clean title cars with higher mileage. Explore certified pre-owned vehicles with warranties. These options provide better long-term value and peace of mind.